TP ICAP Group PLC (TCAP) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today. This is our agenda for the morning. I will start with an overview. Robin will take you through the financial performance. And then I will update you on the good progress we're making executing our strategy before we open up for questions. In 2021, we faced a series of challenges, including unusually quiet secondary markets, especially in the first half, as well as continuing disruption caused by COVID, Brexit and adverse currency movements. Against this backdrop, we delivered a resilient revenue performance with higher levels of activity in the second half. We grew our overall market share and we increased broker productivity 8% in Q4 compared to the prior Q4. We also took action to mitigate margin pressure by delivering savings of GBP 31 million. In addition, we made material progress advancing our strategic transformation. Our ambition is to establish TP ICAP as a leading electronic market infrastructure and information provider. In our broking businesses, we are deploying cutting-edge technology to pivot our execution from high touch to low touch and give clients easy access to our global liquidity pools. This improves profitability and increases volumes. We have branded our electronic execution platform, Fusion. Approximately 1 year into a 5-year program, 20% of in-scope Global Broking revenue is now live on Fusion. We are well advanced in the process to integrate Liquidnet, delivering cost synergies ahead of target and on track in developing and executing our growth plans. And we continue to build a Parameta Solutions. We rebranded the division last April and generated double-digit growth in its data and analytics business. This transformation, combined with the actions we are taking on cost is making the group significantly more efficient and will improve margins. We are also diversifying our client base and revenue profile. 42% of our 2021 revenue came from outside Global Broking compared to 36% in 2020. Before I turn to the financial highlights, I want to comment on the impact of the war in Ukraine. We've stopped trading with all Russian banks and sanctioned counterparties who accounted for around 0.5% of total revenue in 2021. Robin will provide further detail on our exposure in this presentation. Turning now to the financial headlines. For most of the year, secondary markets were quiet with continuing low interest rates across the G7 and a flattened yield curve. There was a welcome pickup of activity in the final quarter as inflation increased and some central banks began raising interest rates. Our revenues reflect the weak first half before recovering in the second half. Revenue for the year was 8% higher on a constant currency basis or 4% on a reported basis at approximately GBP 1.9 billion. Excluding Liquidnet, revenue was about 1% lower than last year, in line with our guidance. On an adjusted basis, EBIT was 9% down in constant currency at GBP 233 million or 14% lower on a reported basis. The EBIT operating margin of 12.5% decreased 2.3% in constant currency or 2.7% on a reported basis. This was driven mainly by a GBP 20 million decline in contribution due to a change in revenue mix. Earnings per share were 19.5p, and we have declared a final dividend of 5.5p, bringing the full year dividend to 9.5p per share, in line with our policy. I'll now hand over to Robin to take you through our financial performance in detail.

Thank you, Nico, and good morning, everyone. Against the backdrop of challenging market conditions, excluding Liquidnet, our revenue was broadly in line with the prior year in constant currency. Despite ongoing investment in the business, we kept costs flat and completed the necessary actions to deliver annualized cost savings of GBP 35 million, in line with our target. We also grew our market share and continue to hold our market-leading position. So starting with the income statement. Revenue increased 4% on a reported basis to GBP 1.9 billion. This includes 9 months of Liquidnet revenue. Excluding Liquidnet, revenue decreased 1% in constant currency to GBP 1.7 billion, in line with our guidance, with a strong recovery in the second half as trading conditions improved. Adjusted EBITDA was down 4% at GBP 315 million, with EBITDA margin 1.4 percentage points lower at 16.9%. Adjusted EBIT decreased 14% to GBP 233 million, and EBIT margin was 2.7 percentage points lower at 12.5%. These movements mainly reflect a reduced contribution as a result of a change in revenue mix despite keeping costs flat. I'll talk about the revenue mix later. Net finance costs of GBP 56 million was 16% higher than 2020. Almost half this increase was additional interest on lease liabilities for our new office in the City of London and for acquired Liquidnet property. Taken together, this resulted in adjusted earnings before significant items of GBP 148 million and adjusted earnings per share of 19.5p. As Nico said, we intend to pay a final dividend of 5.5p, bringing the total dividend for the year to 9.5p. This is 58% ahead of last year's dividend when adjusting for the bonus element of the rights issue and is in line with our policy of being covered twice by adjusted earnings. Turning now to the drivers of revenue on the next slide. The charts here show transaction volumes by asset class. As you can see, volumes declined across every asset class in the first half with an uptick in most during the second half. You can also see exceptional volumes in every asset class in the first quarter of 2020, making 2020 both a strong comparator and an outlier. Slide 9 shows market movements by asset class in 2021, alongside our year-on-year change in revenue. In rates, London clearinghouse notional swap clear volumes were down 14%. There were also double-digit declines in Eurex equity market volumes with a single-digit decrease in FX and credit volumes. Against this backdrop, our performance was resilient, and our revenue outperformed market volumes in most asset classes. So let's turn now to our breakdown of revenue by division and asset class. From now on, all my comments on revenue are in constant currency. The breakdown by division is shown on the left-hand side. I'll focus my comments on the right-hand side, where you can see a significant change in revenue mix within Global Broking. Rates is our largest and most profitable asset class and it declined 9%, whilst Equities in Global Broking, which has a lower contribution margin, increased 18%. This change in mix has resulted in lower overall contribution. The Rates business decreased 9% to GBP 429 million as a result of the adverse impact of quantitative easing and low interest rates on trading volumes during the first half as well as disruption caused by Brexit and the end of LIBOR. As I said earlier, this was a resilient performance considering the year-on-year decline in wholesale volumes. Volume started to pick up towards the end of the year as higher inflation led to prospect of higher interest rates and tighter monetary policy. FX and money markets declined 6%, broadly in line with lower market volumes. Emerging markets grew 2% to GBP 179 million. And equities increased 18% to GBP 226 million, mainly due to the inclusion of the first full year of Louis Capital Markets. Excluding Louis Capital Markets, equities grew 3%. Revenue in credit was down 5% to GBP 82 million, broadly in line with market volumes as strong bond issuance in the period did not lead to increased secondary trading. Reported EBIT for 2021 was GBP 233 million compared to GBP 272 million in 2020. I'll talk you through the movements on Slide 11. In 2020, the strengthening of sterling against the dollar had an adverse impact of GBP 16 million bringing adjusted EBIT for the year to GBP 256 million in constant currency. In 2021, there was a decline in contribution of GBP 32 million as a result of revenue mix, which was partly offset by additional front-office savings of GBP 12 million delivered as part of our GBP 35 million annualized cost savings program. We kept management and support costs broadly flat year-on-year despite continued investment in technology and adverse impact of GBP 11 million from foreign exchange and additional property costs associated with our new office in the City of London. We achieved this by cutting back office costs by GBP 7 million as well as reducing bonuses. Moving on now to results by business division. In Global Broking, we grew our market share despite revenue decreasing 2% to GBP 1.1 billion. Within Global Broking, as you've seen, growth in equities and emerging markets was offset by a decline in rates, credit and FX and money markets. Contribution decreased 4% to GBP 411 million as a result of the change in revenue mix I spoke about earlier. Front office costs were 1% lower, and management and support costs fell 4% despite increased investment in Fusion. Adjusted EBIT was GBP 173 million, and EBIT margin decreased from 16.2% to 15.6%, driven by lower revenue, the less favorable revenue mix and ongoing investment. Energy & Commodities revenue decreased 1% to GBP 370 million against a strong year in 2020, that included record pandemic-driven oil volumes. Growth in Environmental Products, oil and bulk commodities during 2021 was offset by lower revenues in gas. Front office costs were 1% lower, in line with revenue, and management and support costs were flat. This resulted in adjusted EBIT of GBP 47 million. Adjusted EBIT margin reduced from 13.5% to 12.7% due to lower revenue. Agency execution revenue increased to GBP 246 million due to the inclusion of GBP 159 million from Liquidnet. Excluding Liquidnet, agency execution was down 1%, reflecting weaker activity in the relative value business compared to an exceptional year in 2020. There was a strong recovery in relative value in the second half. The Contribution margin has decreased as a result of lower revenue and additional clearing fees as we outsourced our clearing arrangements to a third-party provider. This change was implemented to significantly reduce the liquidity risk of the group as we are no longer subject to material margin calls. Adjusted EBIT broke even for the year as we continue to invest in the business to support future growth. Liquidnet revenue of GBP 159 million for the 9 months post acquisition, was 6% down on the same period in 2020 on a pro forma basis and generated a contribution of GBP 68 million at a margin of 42.8%. [indiscernible] lower than guidance, following an unusually quiet month in December. After cost of GBP 70 million, the business made a loss of GBP 2 million excluding interest from the IFRS 16 lease charge. This contributed to the reduced EBIT margin in Agency execution. Margin will improve as cost synergies feed through. We delivered GBP 12 million of cost synergies in 2021, which means we are ahead of plan on our 2023 target of GBP 20 million. We now expect to make cost synergies of at least GBP 25 million. On a pro forma basis, Liquidnet revenue for the full year was GBP 221 million, 9% down on 2020 in constant currency, reflecting lower wholesale equity market volumes across the U.S., Europe and Asia. Bear in mind, there were unusually high volumes in the first quarter of the prior year due to the pandemic. Liquidnet's overall market share of equity trading volumes in 2021 increased slightly in Europe and decreased slightly in the U.S. Revenue in Parameta Solutions, which includes data and analytics and post-trade solutions grew 5% to GBP 166 million. The Data and Analytics business continued to grow in double digits, with revenue up 10%, driven by the launch of new higher-margin products, growth and diversification of its client base, increased regional sales coverage and an expansion in distribution channels. Post Trade Solutions declined 23%, partly as a result of lower volumes in our Matchbook Rates business due to the end of LIBOR. This decline was partly offset by growth in ClearCompress, which provides electronic compression services and in eRepo, which enables the repurchase of government securities. The decrease in adjusted EBIT margin from 43.2% to 41.6% reflects increased investment in new product development and additional hires in our regional sales team. Moving on now to significant items. These are not included in the adjusted results so that we can better measure business performance and compare with other reporting periods. Significant items amounted to GBP 143 million after tax and associates, an increase of GBP 56 million on 2020. The majority of this increase is the result of restructuring and debt refinance costs that have been incurred to generate future run rate savings, which I'll talk about on the next slide. Restructuring costs of GBP 42 million included both cash and noncash items. The largest noncash item was a GBP 16 million impairment of property, plant and equipment and right-of-use assets as we vacated properties to consolidate our footprint. The largest cash items included GBP 9 million of additional costs related to premises, GBP 7 million for the Liquidnet integration and GBP 5 million associated with the group cost savings program. Disposals, acquisitions and investments of GBP 79 million was similar to the prior year and are mostly noncash. GBP 46 million of this was amortization of acquired intangible assets, which relates to the value of brands and customer relationships. This will continue to amortize over the next 10 to 15 years. Amortization increased by GBP 7 million during the year as a result of the Liquidnet acquisition. There were also GBP 14 million of Liquidnet costs related to the acquisition. Legal and regulatory costs amounted to GBP 15 million, including GBP 9 million for litigation in Germany and Australia and GBP 4 million from an AMF fine. We also incurred costs of GBP 16 million to refinance some of our debt, which will deliver a reduction in our financing costs. I'll talk about this in more detail later. Moving now to cost savings. As I said earlier, by the end of the year, we completed actions to achieve GBP 35 million of annualized cost savings under our cost savings program. This program delivered GBP 19 million of P&L savings in 2021, which comprised GBP 12 million in the front office and GBP 7 million in the back office, as you saw earlier on the adjusted EBIT bridge. We also delivered GBP 12 million of Liquidnet synergy savings. This resulted in total P&L cost savings in the year of GBP 31 million. Looking forward, we expect to deliver a further GBP 38 million of P&L savings by the end of 2024, including about GBP 25 million in 2022. Taken together, this will result in annualized cost savings of GBP 74 million by the end of 2024 with a one-off cost to achieve of GBP 77 million. However, the benefit of the 2022 savings will be impacted by realized and unrealized losses as a result of sanctions imposed on Russian counterparties and assets, additional Brexit costs and cost inflation. Turning now to cash flow. There was a cash inflow of GBP 118 million during the year compared to an outflow of GBP 14 million in 2020 as a result of a net inflow after the acquisition of Liquidnet, which includes the proceeds of the rights issue, lower dividend payments during the year as well as an inflow from the refinancing of our debt in November. I'll comment on 2 other changes on this slide. There was a working capital outflow of GBP 53 million, which mainly reflects higher trade receivables as the number of days sales outstanding increased. And there was a return to more normal levels of taxation in 2021 after unusually high payments in 2020 when we paid tax for both 2020 and the second half of 2019. Our total cash, cash equivalents and financial investments shown on Slide 19, increased from GBP 783 million in 2020 to GBP 899 million in 2021 as a result of the Liquidnet acquisition. GBP 838 million of this is held in regulated entities for regulatory purposes, GBP 51 million is held in nonregulated entities for working capital purposes and GBP 10 million is held in corporate entities. You will recall that as a result of our redomiciliation, we no longer have to put aside around GBP 25 million a year to comply with CRD IV. Cumulatively, this would have amounted to around GBP 150 million by the end of 2026, when our waiver from consolidated capital supervision was due to expire. You'll find the balance sheet in the appendix. So I'll move on now to talk about debt. Gross debt before IFRS 16 lease liabilities increased 18% to GBP 856 million. During the first half, we increased the drawdown on our revolving credit facility and issued GBP 37 million of vendor loan notes in order to make the Liquidnet acquisition. In November, we issued GBP 250 million of new debt at a rate of 2.625%. We used some of this new debt to redeem GBP 184 million of the January 2024 sterling notes which has a coupon of 5.25%. As a result, we expect to make an annual saving in net finance costs of around GBP 4 million per year over the 7-year life of the bond. IFRS 16 lease liabilities increased to GBP 286 million due to the leases on our new office in the City of London and Liquidnet's property footprint. You'll recall that these liabilities are excluded from our banking covenant calculation. Our investment-grade credit rating was reaffirmed by Fitch last September at BBB- with stable outlook. Moving on now to guidance. Trading conditions this year have improved compared to the same period last year, and revenue up to March 11 was 4% up in constant currency, excluding Liquidnet, or 16%, including Liquidnet. Despite more favorable market conditions year-to-date, the level of volatility and transaction volumes for the year is unpredictable, especially given the uncertainty caused by the war in Ukraine. Let me remind you that we have stopped trading with sanctioned clients and that revenue from Russian clients accounted for around 0.5% of total revenue in 2021. On March 11, the value of realized losses on failed settlements with sanctioned Russian clients was GBP 4 million. We have also recognized potential unrealized losses of GBP 9 million in relation to failed settlements and written-down trade debtors with sanctioned Russian clients by GBP 1 million. In addition, we have GBP 12 million of unsettled matched principal transactions in Russian financial instruments outstanding, where neither counterparty has been able to settle and where no net loss has been recognized. I'd also like to remind you that 60% of the group's revenue is in U.S. dollars compared to just 40% of our costs. So the strength or weakness of sterling against the dollar is a headwind or tailwind on our revenue and operating margin. Having achieved GBP 31 million of P&L cost savings in 2021, we are targeting a further GBP 25 million of P&L cost savings in 2022, although this will be impacted by the additional cost headwinds I mentioned earlier. We continue to work on reducing our cost base. And if our revenue profile in 2022 is similar to 2021, these cost savings will drive a slight improvement in the group's EBIT margin. We plan for lower significant items of around GBP 125 million, excluding unanticipated legal and regulatory costs. We expect the tax rate to increase slightly to 25.5%, and for the group net finance expenses to come down to about GBP 52 million as a result of refinancing our debt. We continue to invest prudently in the business to generate medium term growth and plan to spend around GBP 45 million in strategic IT investments this year, of which around GBP 18 million will be OpEx and GBP 27 million will be CapEx. Total CapEx is likely to be around GBP 65 million, which includes the strategic investment in technology I just mentioned. Finally, our dividend policy targets cover of approximately 2x adjusted earnings. This reflects a balanced approach to capital allocation, enabling investment while allowing dividends to increase as adjusted earnings grow. Thank you very much. I'll now hand back to Nico.

Thank you, Robin. Let me start with a brief reminder of our strategy to drive sustainable earnings growth over the medium term. As of now, we are the world's largest supermarket of OTC instruments. From this position of strength, we are transforming our business through technology. By pivoting our broking businesses from high-touch to low-touch activity, we improve profitability. We also enhanced the client experience by giving them easier access to our aggregate global liquidity. But to deliver higher and better quality earnings, we need to go further. So in addition, we are expanding and diversifying our activities and client base. Our Global Broking division is the largest provider of wholesale OTC marketplaces with a share of around 40%. We command market-leading positions across a broad range of asset classes, as you can see from the 2021 Global Capital Awards, which include being recognized as overall Interdealer Broker of the Year. Our aim in Global Broking is to progressively electronify, so we are systematically rolling out state-of-the-art technology in a multiyear program from 2021 to '25. Once complete, our clients will benefit from a single sign-on to access our entire suite of electronic solutions and our global liquidity pools across all our asset classes and brands. We have developed this platform internally and branded it Fusion. Its quality is such that it has been recognized in 2022 as OTC Platform of the Year by Risk Magazine. Engineering this shift from high touch to low touch drives margin expansion and volumes, so protecting our leading market share. This improvement in margin is illustrated on this slide by 2 examples. First, interest rate options. In 2021, 42% of interest rate options revenue went through Fusion. And the contribution margin was about 20 percentage points higher than the average across Global Broking. In government bonds, when 100% of revenue went through Fusion, the contribution rate was about 25 percentage points higher. These examples validate our strategy. So we are accelerating the migration of more products onto Fusion in both Global Broking and Energy & Commodities. About 55% of Global Broking revenue is in scope for this migration, covering rates, foreign exchange, credit and emerging markets. Equities, which account for about 20% of Global Broking revenue are not in scope, or they are already traded electronically via exchanges. So we are targeting OTC segments that are the most suited to electronification and where we have the biggest opportunity to improve performance. We made good progress in 2021 and are on track with our 5-year plan. As I said earlier, 20% of targeted revenue is already live on Fusion. Specifically in foreign exchange, 35% out of a total of 90% of in-scope revenue is now on Fusion. And in Rates, 15% of revenue is now on Fusion with an objective to transfer 80%. In 2022, we plan to add segments that represent a further 20% to 25% of revenue. I'll now move on to Energy & Commodities. TP ICAP is the world leader in OTC energy and commodities markets with an especially strong position in oil. Our aim in Energy & Commodities is to consolidate our global leadership position by shifting to low-touch workflows through Fusion just as we are doing in Global Broking. We recognize that low-touch workflows are new for energy OTC markets, so we are targeting the most appropriate products for rollout to clients on Fusion. For all products, about 70% of revenue is in scope. And for environmental products, about 80%. In 2021, we launched our first Fusion energy client-facing screen in a pilot program for the Norwegian green certificates market. More than 120 clients are using it and engagement is very high. We also developed a sophisticated order management system for Fusion energy. This enables us to capture order and trade data more effectively, which creates commercial opportunities for Parameta Solutions. It also drives greater operational efficiency. This new OMS has been built for 75% of our target segments, and we expect to complete its internal rollout by the end of this year. The global drive for sustainability is also creating tangible growth opportunities for energy and commodities. Commercially, our ambition is to be the broker for transition, helping our clients accelerate their move to a low-carbon economy. In 2021, revenues from environmental products increased by 40% year-on-year. Moving on now to agency execution, where I will focus my comments on Liquidnet. Liquidnet is a global leader in large-sized cash equities order execution with a market share of around 30% of the very largest transactions in Europe. But Liquidnet equities has not yet realized its full potential. Over the course of the year, we launched initiatives to take advantage of some immediate opportunities. TP ICAP has a global footprint so we are leveraging our offices and people to give Liquidnet better distribution. We also launched selective program trading and cross-border trading initiatives. Program trading uses algorithms to trade a basket of stocks in large volumes, sometimes at high frequency. Liquidnet has the capabilities to be competitive, but it was not historically deemed a core service. We are now organizing a clear and compelling offering for clients. Similarly, in cross-border trading, which involves taking orders in 1 region and executing them in another, Liquidnet has a global footprint, but lacked focus and resource. Again, we have addressed this. Next, Liquidnet already has a leading suite of dark execution algorithms, which is well recognized, as you can see from the recent awards on the slide. We are continuing to enhance and innovate in this area so that Liquidnet can maintain its competitive edge and capture additional market share. In 2022, we will also be making some changes to our U.S. market offering to help clients achieve higher fill rates on their orders. Turning now to Liquidnet credit. We have identified material revenue opportunities in the corporate bond trading market. And our goal is to achieve 3% to 6% market share by the third year post acquisition. To achieve this, we're making it possible for dealers and buy-side clients to trade with each other. To create a successful marketplace, it's necessary to have 4 building blocks in place, onboarded customers, technical connectivity, attractive trading tools and functionality and liquidity. In less than a year, we have advanced in all 4 areas. First, onboarding. We have created internal workflows to enable Liquidnet buy-side clients to transact with TP ICAP dealer clients without the need for additional legal paperwork. We have also connected the existing dealer on buy-side user interfaces in TP ICAP and Liquidnet. So buy-side clients can continue to use the highly rated Liquidnet front end, while TP ICAP dealer clients use Fusion. So onboarding is done. Front-end connectivity is done. Next, platform services and functionality. We launched a new service, Liquidnet Primary Markets in September last year, just 6 months after we closed the acquisition. This is groundbreaking for the market, and I will talk more about it in the next slide. We're also extending the range of functionality this year, especially to capabilities targeted at the secondary market. Importantly, this includes the dealer to client requests for "protocol." Lastly, we've been working closely with dealers to bring their liquidity onto the platform and several large investment banks have already started the technical work necessary to stream prices. So the building blocks for a successful marketplace are well advanced. And you can see that buy-side traders are using the platform much more actively. Buy-side logins are up 68% since acquisition. Dark pool trading volumes have grown 50%, and high-yield transactions are increasing at a faster rate than the market. Now let me talk in more detail about primary markets. I'm proud to say that Liquidnet Primary Markets is an industry first. Bond issuance is one of the last parts of the capital markets to electronify. So the process is currently largely manual, error-prone, inefficient and time-consuming. The aim of Primary Markets is to automate this process. There are 2 core components of our launch in September last year. First, a tool that allows syndicate banks to automatically send all the information about a new bond directly to their buy-side clients order management systems. This tool also allows buy-side traders to send orders directly to the syndicate banks. Second, an electronic trading platform or central limit order book. This addresses the problem of limited transparency on price and liquidity in the market. The buy side received the platform first, followed quickly by the banks who from January this year can access Liquidnet via our Fusion platform. Over the first half of 2022, we're going to extend the range of securities the trading platform can handle to include sovereigns, covered bonds and SSAs. Since launching Primary Markets, we have had several requests from vendors and platforms active in the new issue space to connect to the Liquidnet platform. we are pursuing an open architecture approach, and we integrate some of these third-party platforms to extend our reach. Turning to the secondary markets, which are our major focus in 2022. We are planning to roll out critical new protocols such as request for quote, in conjunction with getting dealers to stream liquidity. The combination of request for quote and dealer liquidity will be a major step forward for Liquidnet credit. As we enrich the platform, we are also enhancing the dark pool. Many clients would like to use dark negotiation more so we've made technical changes to make the negotiation process easier. We have also introduced a trade cover desk to help clients use the platform more effectively. As a result of these enhancements, we are adding an average of 10 new buy-side clients each month. Moving on now to Parameta Solutions. Parameta Solutions is a world-leading provider of OTC data-driven products. The division is formed of 2 businesses, data and analytics and post-trade solutions. The data and analytics business is a fast-growing subscription-based, high-margin business with a revenue retention rate of 98%. So it offers excellent earnings diversification and sustainable growth opportunities. Our strategy to grow this business is threefold. First, to develop new data and high-value information products; second, to diversify and grow our client base with a focus on the buy side and corporates. And third, to increase our channel partners and grow multichannel distribution. We made good progress during 2021. I'll start with new products. Responding to regulatory change, we developed and launched a global risk free rate service, which is driving significant new subscription revenues. We also brought to market a dedicated order surveillance package to provide clients with deeper regulatory insights. In addition, we expanded our suite of high-value information products by adding foreign exchange to complement our existing bond evaluated pricing. And we launched trade cost analysis to support best execution. Turning to our client base. We are expanding and diversifying by aligning our sales team to specific market segments. This has delivered good results. 40% of net new sales in 2021 were to buy side and corporate clients. On distribution, we have enhanced our partnerships and offerings so that clients can choose to access our data either directly via the Parameta Solutions web store, through our channel partners or via the public cloud, which offers speed and agility in a cost-efficient manner. The post trade Solutions business continues to innovate and added 10 new large dealer clients to its award-winning compression platform, ClearCompress. Moving on now to an area of increasing strategic importance, Digital Assets. We started exploring digital assets more than 5 years ago. We brokered our first Bitcoin Future block trade in 2019, followed by the first bitcoin option in 2020. Today, we have an established team in place executing transactions on crypto derivatives either listed or OTC. In 2021, we announced plans to launch a wholesale spot trading venue for digital assets. This new venue will also provide connectivity to a network of blue-chip digital asset custodians such as Fidelity or Zodia by Standard Charter. Several well-known market makers will be on the venue from launch, which we expect to be live later this year, subject to FCA registration. Looking further ahead, this venue will enable us to trade more products as traditional assets become tokenized. Before I conclude, I'd like to talk briefly about current trading. As Robin said earlier, constant currency revenue until March 11 was up 16% year-on-year, including Liquidnet or 4% excluding Liquidnet. However, it's difficult to predict future market activity. And of course, extreme volatility can also reduce risk appetite and liquidity capacity. So in an uncertain environment, we continue to focus on managing those things in our control as we did in 2021. In challenging market conditions, we took action to protect our margin -- reduced cost by GBP 31 million despite ongoing investment in the business. We delivered resilient revenue performance and grew our market share, and we continue to execute our strategy to advance our transformation. We are on track with our 5-year plan to migrate activity onto our Fusion platform in Global Broking and Energy & Commodities. This will enhance our margins and give our clients access to better pricing by aggregating liquidity across our brands. The integration of Liquidnet is well advanced, and within a year, we have started implementing growth plans in both equities and credit. We have further diversified our client base and strengthened our revenue profile as Data & Analytics continues to grow in double digits. 42% of our revenue came from our non-Global Broking businesses in 2021 compared to 36% in 2020. This successful execution of our strategy positions the group well to deliver increased returns to shareholders over time. Thank you very much for listening. We are happy to take any questions. [Operator Instructions]

[Operator Instructions] Our first question for today comes from Kim Bergoe of Numis.

It's Kim from Numis. Just two questions for me, if I may, one relating to Rates, obviously, your single largest product. But one thing is you see that -- how is that going, moving that over to Fusion? It seems like there was a big opportunity there, but you've made less progress. So if you could just sort of comment on that, why that is? And also relating to rates, again, if you could talk a little bit more about sort of current trading, what does that look like? How does -- what you talked about volatility, how does that impact Rates trading? And then my second question, if you could just give a little bit more detail on sort of market share throughout 2021, how is that moving both versus other sort of IDBs and also electronic versus voice, how do you see that play out? And how has that moved during the year? Thank you.

Yes, first question regarding Rates. So we have given our priority in terms of migration to our suite of solutions Fusion for Rates and foreign exchange. In Rates, what we've seen is that we migrated the interest rate options business on to Fusion. The first brand to migrate was ICAP. And we've seen -- we tried to illustrate with an example, the benefit of the growth in market share, but also the benefit in much higher contribution as a result of that migration. What we have seen recently is that when we migrated TelePrebon onto the same stack of technology, we've seen a big improvement in terms of contribution but also a gain in market share by around 9% in the second part of 2021. So what we are trying to achieve is to group our Rates products by currency so we will have completed in 2022, the -- what we call the Sterling hub. It means that in Fusion we are grouping across brand families of products in Rates. So we will continue that migration. We are roughly at 20% of our objective on Rates. It will accelerate in the coming years because we've invested a lot in the technology. So we could now start to deploy it more easily across desks. But your question also is about current trading on Rates. So we have seen a bit of a contrasted activity. Actually, we've seen a huge take-up in the EMEA, in the U.K. at the beginning of the year on our Rates activity. Less so in the U.S. before March. One of the reasons is that the U.S. was still impacted with a lot of our clients and our brokers impacted by COVID in the first 2 months of the year. But overall, we've seen a take-up of activity which is definitely led by pressures on inflation and the anticipated of rates going up this year. One important element is that we've also seen a lot of the increase in rates of activity being in short maturity, short-term swap trades. So we've seen a lot of volumes, but sometimes this volume doesn't translate immediately in large higher revenues because we are charging clients based on the value of the transaction. So that's important to have that in mind. But overall in rates. This is not only our stronger franchise in terms of market share, but it's also the franchise where our contribution ratio is the higher in the firm. So that leads to higher revenue but also higher contribution and an impact on the -- positive impact on the bottom line. So we think that the environment will bring more tailwind this year for rates. Regarding your second question on market share, if we compare with traditional IDBs, obviously, we have gained market share in most asset classes. So that's based on the disclosure of revenues from our competitors in terms of their revenue in Global Broking and by asset classes. We have not seen any disruption, I would say, from new venues or electronic venues in our traditional asset classes. So we continue to, if I may say, to disrupt ourselves, we continue to make surgery on ourselves to migrate more of our business from high-touch voice into low-touch.

That's very clear. If you can just quickly follow-up on Page 24 in your slide deck. You talked about Rates having reached 15%. I think that's where sort of what you are currently referring to is about sort of 20% now. And it's just -- I'm not looking for sort of a number, but just an indication of where coming out of '22, where could we reasonably expect that to have gone to, that 15%? Or is that the right way of looking at it?

I think we will be in between 20% to 25% overall in terms of Rates revenue at the end of '22.

That has moved on to diffusion?

From the 15%.

Our next question comes from Piers Brown of HSBC.

I've just got two. One is on the EBIT margin outlook. So I guess after several years where we were in a range of sort of 15-odd percent, we're at 12.5% for full year '21, and it sounds like we'll be somewhere in that sort of region, again, full year '22. And I appreciate there's various headwinds you've had to deal with over the short-term currency, Brexit, now we've got the Russia situation. But just as we think further out into the midterm, given the mix of business which you're currently running with, do you think it's still feasible to get back to the old levels EBIT margin? Or do you think we're structurally at a slightly lower run rate now than what maybe the business previously was running at? And then second question, just on Liquidnet, you've given a very helpful update on the various initiatives which are underway. I wonder just in terms of milestones for this year, particularly in the credit business, what is the key milestone we should be looking at that gets you further towards the 3% to 6% market share that you're targeting? Is it the rollout of the request for quote functionality? Or is it something else on the credit side that you think is the key sort of enabler to move into that market share goal? .

Thanks for the questions, Piers. Just on EBIT margin outlook, I think as we said in the presentation, we can kind of guide to in the short term what the impact of the cost savings that we've been working very hard on would do were all things being equal, revenue have a very similar profile to 2021, albeit that it's challenging to predict what the revenue in 2022 will be. So that's why we certainly believe that that being the case, we'd have a slight improvement in the margin. But looking in the more medium term, as you asked, we don't, at this point, have any reason to veer away from the increments that we believe we can achieve in our margin over time with the strategic investments that we're making and that transition of our business to more electronic. We're starting from a lower base than we did when we did our Capital Markets Day because we were basing from 2019, but we think that those -- the incremental changes are still aspirations that we believe we'll achieve.

If I take Liquidnet, your question about our progress and what you expect in terms of key milestones. I think clearly, in credit, if we just focus on credit this year. So we have 3 things to look forward to. I think the first one is continue to grow the primary platform, the primary issuance platform. So as we said just a few minutes ago, we managed to connect electronically the dealers -- investment bank dealers with the buy side to trade on the central limit order books in January, so this is relatively recent. So we will -- we need to look for additional volume of trading in this area. And we should start making revenues from it in the second part of the year. And most importantly, on the secondary markets, there are 2 elements. One, as you mentioned, is the development of the request for quote functionality. So that's a piece of technology that we are working on. Objective is to deliver it for July. In the meantime, we have banks -- some banks are doing the technical developments to be able to stream prices via our API. So that's a very important element to monitor because that will condition the timing on the success of seeing liquidity on the platform. So we've done onboarding. As I said, we've done the electronic connectivity. We are finalizing the development of the request for quote and streaming, the functionality. So the next step will be getting the liquidity from those banks. So we are on that last segment, dependent on the banks delivering the developments, the IT developments. And last point is the dark pool. I think it's still very important to grow our fill rates on the credit dark pool because many clients, asset managers are very keen to match within the dark pool. And for that, we are doing 2 things mainly. One is in coordination with our members, clients, we are making the rule books evolving, make it simpler for our clients to match. And we've also lined up teams to help the clients to manage the liquidity and to help the client. So we have a cover team, which is also a big change in credit. So overall, we have to look for a change in the revenue and credit in the second part of 2022.

Do you mind if I just ask a follow-up on the market share, the number, the 3% to 6%, is it too simplistic to think about an absolute revenue number that would accrue from that sort of market share band? Or is there a number which you have in mind that you would get to were you able to achieve that sort of share win?

It's -- if -- what we have projected is 3 full years post completion is to generate -- that sort of market share would generate GBP 100 million of revenue equivalent. So that's our target.

Our next question comes from Vivek Raja of Shore Capital.

A couple of areas that I wanted to explore, please. The first -- so getting my -- I'm scratching my head about the cost savings a little bit. Just for the current year, FY '22, I just wonder if you could outline what cost savings you expect to achieve in Global Broking, so the core business and whether there are -- I couldn't catch whether there are incremental synergies from Liquidnet to come through, how much of those overall cost savings are related to property? And then importantly, what the cost to achieve the current year cost savings going to be? -- sorry, for the cumbersome the sentence. What are those costs to achieve as well? What exactly do you expect to be spending money on there? And then the second area was Liquidnet. Hopefully simple question, but the circa [indiscernible] million of revenues you delivered in '21, how much of that was outside the equities franchise? And just sort of cutting through all the comments you've been making about growing the sort of credit franchise. What would you expect in terms of an uplift in revenues and Liquidnet outside the equities franchise in '22? And just sort of connected to that, I remember previously you mentioned GBP 25 million to GBP 30 million of strategic investment over the 1 to 2 years post completion in Liquidnet. Where are you with that spend? Just wondered if you could update on us on that. .

Thanks, Vivek. A good chunk of questions there. Let's see if we can get those answered and if I miss one, certainly shout them back out. In terms of cost savings, we've outlined that over the next 3 years, we would seek to achieve another GBP 38 million of savings on cost initiatives, with a cost to achieve of GBP 43 million. For 2022, we're talking about an incremental GBP 25 million of targeted cost saves. They will be spread across 2 main areas in 2022. The run rate of incremental savings on the GBP 35 million cost-saving program that we talked about, so we'll achieve the residual balance of those, but also additional Liquidnet synergy savings. So it's split between the 2. The property rationalization that we talk about of GBP 14 million in that period will probably only start to kick in. There'll be small elements of value in that in 2022. We'll see more of that kick in towards the back end of the year. So it's really across those 3 core components. The cost to achieve those synergies... [ Audio Gap ]

Before that, there was a question about Liquidnet synergies. So we guided to EUR 20 million overall of Liquidnet synergies. We've executed 12. So that's the P&L impact in 2021 -- positive P&L impact in 2021. We will achieve more than 20. So we're guiding to at least 25% in Liquidnet synergies.

The cost to achieve those in 2022, we would anticipate around about GBP 20 million in the period on new savings initiatives. But GBP 40 million of cost to achieve cost-saving programs initiated in 2021 as well. So that's outlined in our guidance in the RNS. The next questions that you had were on Liquidnet's revenue. I think it's fair to say that the lion's share of that revenue was in equities. There was only a small element, less than 5% in other asset classes. So that's why we think in the longer term, the uptick in revenue as well as the efforts that we're making on improving the equities line will be much more beneficial to the bottom line, having made the synergy savings in the cost base. The spending technology on Liquidnet. Much of the spend that we'd already indicated, we indicated about GBP 30 million, as you said, over time. A lot of that spend has already been -- was front-loaded into the credit offering. And I think we talked about around about 2/3 of that expenditure being spent in the first 18 to 24 months after acquisition. And then we'll start spending on Rates. But we need to get the -- we want to get that equity -- sorry, the credit offering up and running, and that's our principal focus.

Could you just specify what you have already spent of about GBP 25 million to GBP 30 million, then what's being spent today? I appreciate that there is some time still to come before that 18-, 24-month time line completes. But how much of that has actually been expensed so far?

I mean much of that has already been spent, and that's gone through the OpEx line in 2021.

Okay. And finally, just to clarify on those costs to achieve, the $20 million in '22, the GBP 40 million in '21. What exactly are those costs? What are you spending the money on?

One of the main items to spend money on is certainly on the property side, is probably the biggest piece of that. And that's -- and again, the lion's share of that is -- it's noncash. As a consequence of COVID and post the acquisition of Liquidnet, we've -- as we indicated at the end of last year, we've looked at a global project of reducing the -- of TP ICAP's premises footprint by around about 25%. That will yield significant savings over time. But in doing that, we've had to -- and we've started to vacate premises, particularly in the Liquidnet estate. We'll do some in 2022. And by vacating premises and making them available to let that triggers a write-down of the right-of-use assets, which we took on board. So very much most of that cost is in doing that. And then there's additional costs that we will incur on the on Liquidnet side. We've taken a lot of costs already out on headcount. So a lot of that now is in rationalizing technology but also restructuring to some of the platforms that we have to, and integrate the business into the TP ICAP estate. So that's -- hopefully, that gives you a sense of what those cost types are.

[Operator Instructions] Our next question comes from Gurjit Kambo of JPMorgan.

It's Gurjit Kambo from JPMorgan. Just a few questions. Firstly, in terms of the migration to Fusion across the different asset classes, how do we think about that in terms of potential reductions in the high-value cost, where the broker costs can come down, how quickly they can come down. I'm just trying to understand, is there a period where you have kind of lower revenues on the low touch, but you have the costs still for the high touch, so just how that sort of migration moves? That's the first question. The second one is just on the underlying kind of EBITDA margin for 2022. Nobody knows what's going to happen for the rest of the year. But where we are today, you clearly have a bit of benefit, a bit of tailwind from the dollar. I think it's about 2% improvement versus the average last year. I guess you get the negative EBIT from Liquidnet disappearing. Hopefully, Liquidnet becomes profitable in 2022. And then the revenue mix, I would -- at the moment, the clearly rates should be quite as supportive to that revenue mix. So am I right in thinking some -- are you incorporating any of those things into the kind of modest EBITDA improvement guidance or not? That's sort of the second one. And then just finally quickly on the E&C side of things. Clearly there's been a lot of volatility, prices are very high. Do you generate income on the value or the volume within the Energy & Commodities businesses?

So migration to Fusion, yes, each time we deploy technology and we migrate onto our Fusion platform, we see benefits in terms of productivity and the cost of doing this business. So that's why we wanted to illustrate these improvements in contribution with examples because you can see that on average we have a 20% difference in terms of contribution levels versus the average of Global Broking. So we, over time, needed to employ liquidity managers. So a lesser number of brokers and then we can recoup some contribution for the benefit of our shareholders. So that's really part of our strategy. Your second question is about the positive exchange impact and the...

On EBIT margin and some of the aspects that we're seeing today. So we're not guiding in terms of margin on those sorts of principles. We've talked about what the impact on our margin would be, all things being equal with last year. You're right, FX or sterling weakening slightly against the dollar is a little -- is a marginal tailwind on the top line. It's also offset a little bit because it's a headwind on the cost base because of the mix. And obviously, we are seeing some pickup in volatility and some revenues over the last 3 weeks or so, given the events that are going on in the world. But that's really -- that's really a sort of a very recent uptick. We've got a slight beneficial mix at the moment on the back of that. But again, we are very early into the year. We're in the beginning of the third month. So that's very difficult long-term view to predict whether that's going to be the shape of the revenue for the full year, which is why we're really very focused on guiding on what the impact would be if everything was all things being equal the same as last year.

E&C, we've seen obviously a massive pickup, particularly in the last 3 weeks. If we look at the month of March, it's just a few days, but just on a few days in March, we're up 40% in terms of revenue. But what is important to have in mind is that this is triggered by extreme movements in terms of prices of some commodities, oil, power and gas. And we see that a lot of players, a lot of clients are taking risk off positions because they are facing these extreme movements. So it's -- on LNG and commodities, it's not something that will remain at such a high level of increase of revenue. When prices go up like this, what we observe is that some of our clients get lower risk limits because their risk limits are based on the value of the underlying assets. And also this huge appreciation in prices could lead to very large margin calls, and those margin calls impact the available liquidity for our clients. So that is very good in the short term, but we -- difficult to predict the costs in the medium term. But I am overall more positive in terms of, as we discussed earlier, our Rates franchise because we could see that this is a trend, this is a tailwind that will continue post these extreme events that we're facing in the world.

We have no further questions. So I will hand back to Nicolas Breteau for any closing remarks.

Many thanks. This is Nicolas.

But we have a few questions that have come in via the chat. So if I may first pose the question from Stuart Duncan from Peel Hunt. Gentleman, are there opportunities to make bolt-on type acquisitions in the Global Broking/energy and commodity businesses being one way to further increase market share?

Sure. In Global Broking, we are already #1 on at least in the top 3 category product we trade. So I would say the potential for bolt-on acquisitions in Global Broking, the opportunities are limited. In Energy & Commodities, it's a more fragmented industry. So there are opportunities. Having said that, we are focusing very strongly on 2 things. One is productivity overall. And second, our level of contribution. So as you know, because Energy and Commodities is more fragmented, much more competitive and still very voice-based business that commands lower levels of contribution. So we are very, very cautious about making acquisitions that would lead to an increase in revenue but a deterioration of our contribution going forward. So at the moment, we're more focused on executing our strategy and pushing the electronification ratio of our business.

And then one final question from Stephen Peak from Isha Properties. He asks, the liquid acquisition of rights issues were strategic events. The movement in the market cap of TP ICAP has been disappointing subsequently. When would it be fair for shareholders to assess this acquisition?

I'll pick one up, it's Robin. Yes, I agree with market cap movement in recent -- over the recent periods in the light of the challenging market has been disappointing. I think for us, we talked when we originally did the rights issue that we anticipated that the acquisition would be earnings accretive by the end of the third year. And I think that's for us still the time line that we would judge the, I suppose the success of that transaction. We're very much on track with all of the strategic synergies that we're trying to make and the build-out of the credit business that we want to add on to that. And so I think we'll start to see that picking up towards the back end of this year into next, and then we can judge it then.

Anything I have no more questions on the chat.

Thank you for your time. I will just finish by a few words saying that definitely 2021 was a very challenging year because of simply volume of activities. If you look at all asset classes we are covering, they all went down. And overall, we managed to deliver raising revenue level. Unfortunately, the mix of businesses meant that we've lost contribution in doing that. So we focused on 2 important things. One is to have a veracious focus on our cost base. And we continue to deliver cost savings. We've delivered GBP 31 million in 2021 in front office and in back offices. We have a program to deliver between GBP 22 million and GBP 24 million, another GBP 38 million of incremental cost savings. It means that we will have delivered post integration of ICAP more cost savings than the full integration delivered. So we will continue to focus on that. In the same time, as we've explained today, we are very focused on executing our strategy to deploy technology to improve productivity of our core business and defend our market shares. We are well advanced in the integration of Liquidnet. We are extracting costs to make it profitable. But beyond that, we have -- we're executing our plans to make it a stronger equity business, but also start generating decent revenues and significant revenues over time on the credit. So I think executing our strategy of electronification, diversification of our revenue. And you can see the success of -- continuous success of Parameta Solutions with double-digit growth of its revenues in '21 associated with a very strong cost reduction program, will benefit our margin going forward. Thank you very much for your attention.